Fund has stake in rifle maker

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When the California State Teachers Retirement System invested in 2003 and 2007 in a private equity firm bankrolling the manufacturer of Bushmaster firearms, the state pension fund should have known the brand's history.

In October 2002, John Allen Muhammad and Lee Boyd Malvo used a Bushmaster rifle in the Washington, D.C., area sniper attacks that killed 10 people and injured three others.

But CalSTRS invested anyway, despite a “Statement of Investment Responsibility” that explicitly says the pension fund will not invest in concerns that “facilitate social injury.”

This summer, you might have expected CalSTRS to do something about its investment after James Holmes allegedly used a similar rifle to help kill 12 people and wound another 58 in July at an Aurora, Colo., movie theater. But CalSTRS did nothing.

Now, the pension fund may be forced to act after police said Adam Lanza used a Bushmaster rifle to kill 20 first-graders and six adults Friday at Sandy Hook Elementary School in Newtown, Conn. Following the disclosure of CalSTRS' indirect investment into Freedom Group, the Bushmaster manufacturer, state Treasurer Bill Lockyer has requested that the teachers pension fund and its sister entity, the California Public Employees Retirement System, determine all of their investments in firearm producers.

After the review, Lockyer says at a minimum he'll propose that both CalSTRS and CalPERS divest from any company that makes guns that are illegal to be sold in California.

“CalPERS and CalSTRS should not be invested in any company that makes guns which are illegal in California,” Lockyer said in a written statement released Monday.

“These weapons have no place in our communities. Our families and children are safer without them,” said the treasurer, who is a member of the CalSTRS and CalPERS boards.

Lockyer's announcement comes as several Sacramento politicians pursue policy changes in the wake of the Connecticut massacre.

Sen. Kevin de Leon, D-Los Angeles, has announced he will introduce legislation requiring Californians wishing to purchase ammunition to first obtain a permit issued by the Justice Department.

Sen. Ted Lieu, D-Torrance, has said he'll introduce a plan to require California schools to have better emergency-response plans.

And Sen. Leland Yee, D-San Francisco, is working on a package of gun-control bills that would require gun owners to register annually and prohibit add-on kits to allow for high-capacity ammo clips, among other things.

But Lockyer's response in particular is getting national attention, after CNN and others have reported on CalSTRS' indirect investment in the Bushmaster manufacturer. CalSTRS put out a statement Tuesday explaining that it owns 2.4 percent of Freedom Group by virtue of investments in 2003 and 2007 into Cerberus Capital Management, a private equity firm.

Cerberus also announced Tuesday that it is selling Freedom Group in response to the shooting.

“CalSTRS investment staff immediately began reviewing our investments in private equity funds managed by Cerberus Capital Management (Institutional Series Three and Series Four) that are invested in the Freedom Group, which manufactures firearms,” CalSTRS said in the statement. “Our investments staff also initiated discussions with Cerberus to learn more about the facts surrounding the investments.”

“... CalSTRS has established a thorough vetting process for potential investments that seeks to test not only their financial potential, but their social, human and environmental impacts as well. In fact, current policies require that the risks associated with products that pose significant threats to human well-being be taken into account before an investment is made by CalSTRS investment managers. They are outlined in CalSTRS 21 Risk Factors, which we adopted in 2008 after our investments in Cerberus.

“Moving forward, CalSTRS will work to ensure that all of our investments are taking these very important criteria into consideration.”

Just based on the sheer number of news releases and proposals coming from Sacramento politicians regarding the Connecticut shooting, it's clear this issue isn't going to be going away any time soon. You'll see more announcements like Lockyer's and the lawmakers' in the coming days and weeks, guaranteed.

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